ETFs to Watch: Inflation, Fed decision and other central banks in focus
Next week’s Federal Reserve decision on interest rates will likely drive Wall Street’s trading activity. However, the Fed isn't the only possible catalyst during the week. Investors will also digest the latest CPI print. The two events could shake up both U.S. Treasury ETFs and inflation-focused funds.
At the same time, exchange traded funds tied to Euro nations and the U.K. will be in focus as the European Central Bank and the Bank of England also prepare to announce their latest rate decisions.
U.S. Treasury ETFs
Heading into the week, Treasuries will remain a hot topic of discussion, with yields coming down since hitting recent peaks in early November. Currently, the U.S. 2-year Treasury yield (US2Y) hovers near 4.32%, 56 basis points lower than its November peak. At the same time, the U.S. 10 Year Treasury yield (US10Y) trades near 3.56% and has declined 67 basis points from its November high.
The Fed's decision and policymakers' projections for the future will trigger trading action in the bond market, as investors try to decipher the future of interest rates. In turn, this will influence ETFs tied to the Treasury and bond markets.
ETFs to watch: (NASDAQ:TLT), (NASDAQ:IEI), (NASDAQ:IEF), (NASDAQ:SHY), (GOVT), (VGSH), (VGIT), (SCHO), (SCHR), (SPTL), (TLH) and (VGLT).
Inflation Fighting ETFs
Ahead of the Federal Reserve’s rate announcement, Wall Street will receive the latest print on consumer inflation. Last month’s cooler-than-expected report signaled to some that peak inflation had been reached. Depending on the results, the upcoming report can provide confirmation to that theory or resurrect concerns about lingering inflation.
The CPI report is due out on Tuesday and could send tremors across the financial markets generally. However, related inflation-focused ETFs will likely be the epicenter of the reaction.
ETFs to watch: (TIP), (VTIP), (SCHP), (STIP), (RLY), (RINF), (RAAX), and (PPI).
Euro & U.K. ETFs
In other central bank news, both the ECB and BoE are set to provide markets with their own rate decisions on Thursday. Currently, the ECB has an interest rate of 2.00% while the BoE sits at 3.00%. Investors will be tuned into what both Christine Lagarde and Andrew Baily have to say.
ETFs to watch: (VGK), (EZU), (EWO), (EWQ), (EWG), (EWI), (EWN), (EWK), (EWU), (FLGB), (EWUS), and (FKU).